I was invited onto Tim Andersen’s podcast recently. I hope you enjoy it.
https://theappraisersadvocate.com/2020/04/02/going-green-with-woody-fincham-taa-podcast-025/
The Appraisers Advocate Podcast
Published by Woody Fincham, SRA, AI-RRS, ASA, RAA
Residential appraiser in the Charlottesville and Shenandoah Valley specializing in high-value homes and properties that include equestrian use, hobby farms, High-performance homes (HERS, LEED, Pearl, Earthcraft), large acreage and any residential style property. View more posts
Valuation Nation 
I don’t mean to sound rude, but I don’t understand this industry at all. Perhaps you could provide a link or information as to why lenders make appraisals such a deciding factor on deals being made between buyers (who have shown they have the ability to afford the asking price) and sellers.
To me, it seems that a home’s value is dependent on what someone is willing to pay for it.
If someone offered to pay x for a house, then that’s what it’s worth. It’s not the sum total of the value of the parts plus labor. The majority of people in Florida would not probably pay $2 million for a 1-bedroom shack, but someone in Florida might. Heck, MANY people in California might.
The more likely reason behind a bank being unable to recoup their losses on a property is because of economic factors in a geographic area that cause a quick and precipitous drop in property values. But appraisers are not fortune tellers, and such events cannot be predicted.
A lost sale due to a low appraisal is a loss of hundreds of thousands of dollars in interest to the bank. It’s a loss of additional property taxes to the county. It’s a loss of money to the seller, and it’s the loss of a new life and home to a buyer.
I’m just not clear what’s motivating this practice and why it’s such an influence on a sale. Perhaps if the appraiser simply assessed whether a sales price is within an acceptable margin….
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I’m in the middle of a very busy day so I don’t have a lot of time to reply to you. But I think the brass tacks of an answer to you would revolve around this, when you’re paying with cash your premise works very well. When you’re paying using the bank’s money that you’re borrowing, the premise does not work at all. Lender’s are very risk-averse and rightfully so. Utilizing Market data to support what the market sees as the value of the property versus what two people see as the value of a property is a safer place for the lender to sit. Buyers sometimes are emotional, and oftentimes make irrational decisions on purchasing something. They can get caught up in the buying process and psychologically don’t make the best decision for themselves, and make decisions on what they think that they want at the time. So I agree with you, sales price when agreed upon between a buyer and a seller are just fine when you’re dealing with it from a cash perspective, but when you’re do using another entities money then you’re stuck with the rules of the game. We do see it all the time or people over pay for something, but that is their decision.
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Very true that both the seller and the buyer are making an emotional decision that merits a little input from a disinterested third party.
Thanks.
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